As the baby boomers exit the single-family housing market in cities, what will happen to prices and neighbourhoods?
Journalist Gary Mason offers a few thoughts in today’s Globe and Mail:
In a 2008 paper co-written with Sung Ho Ryu, Prof. Dowell Myers said communities in the United States face a historic tipping point. The ratio of seniors to working-age residents is expected to grow by roughly 30 per cent in each of the next two decades, the pair calculated….
Those wanting to enter the market in the coming years may not have the money to buy single-family detached homes, either. Thus the dilemma: Who will boomers sell to when they’re ready to move into some swank condo downtown or on a golf course somewhere?
This could actually be good news for young people. An oversupply of homes generally means prices fall. But as home values decline, so will home equity, diminishing retirement savings in the process. Home equity is the single largest component of net wealth for most people.
Today, Prof. Myers [is] anticipating another recession in the latter half of this decade, and that’s when the crisis he’s predicting will reveal itself. “Recoveries are usually fuelled by people who postponed buying a home who are now surging into the market. I just don’t see there being enough buyers for all those selling. I think this is going to be bad for house prices, public finance and global treasuries.”
Tsur Somerville, [of UBC Sauder School of Business], isn’t as pessimistic as Prof. Myers.
“I know it’s one of those theories where the numbers add up and the underlying fundamentals are correct, but I think in Canada, at least, it’s too early to say how it’s going to play out. I think immigration is the key. … The places that need to worry are those cities with an aging profile that don’t have big net immigration numbers and are seeing their young move to other places,” said Prof. Somerville. “I think there are some centres that fit that description that maybe should be worried. But there’s lots of ways this could play out yet.”
I agree that some suburbs may see values fall as younger generations are less interested in–or able to afford–living in more isolated areas that require a long automotive commute to major employment centers. This could really hit some US metro areas.
But in cities where boomers own much of the older single-family housing closer to employment centers, or along transit lines, a wave of selling combined with rezoning to higher density use might actually accelerate a shift toward more sustainable urban living. For example, an older rancher could become two or more homes as it is replaced by a duplex or by two detached homes–or two duplexes–on a subdivided lot.
Such a shift would potentially keep housing prices in check for younger generations–four homes in the same space as one. It would also increase density, which allows for more retail, service and even transit amenities. And finally, such a shift might actually help maintain property values for the aging boomer since the land value would reflect a “higher and better use” on the site.